Lawsuits, Protests and Other Conflict Resolutions
The channel is a business based on contracts – written, implied and personal. But the term “partners” is interesting since it often evokes connotations of equality in a relationship, and everyone knows there’s no equality in the channel.
At the Channel Partners Conference last week, I participated in a new event called, aptly enough, Channel Partners Zone – a session designed to discuss serious questions in the atmosphere of the TMZ bullpen. When the video comes out, you’ll see how unconventional this session was based on the adult beverages each of the panelists were holding.
Channel Partners’ audience is primarily telephony agents, and several at this gathering were quite upset that a regional carrier, which shall remain nameless, used a provision in their partner contracts to nullify their annuities. In plain language, partners of this carrier were no longer getting their cut of the service agreements they sold.
The question posed to me was this: What should they do? My quick retort: Sue. And boy, did that provoke some discussion.
The aggrieved agent in the audience looked into suing, but declined. She had a case, but none that a lawyer would take on contingency. To fight a carrier with substantially deep pockets and legal resources would bankrupt her small firm. Fighting back just doesn’t seem like a feasible option with any possible outcome for the better. Even if a court case is successful, many solution providers are fearful that legal action would brand them a troublemaker and drive other vendors away from working with them.
Here’s the issue: Partners often feel powerless against vendors, carriers and service providers regardless of their size. Vendors write the partnership agreements; they have the backing of banks and investors; they have legal resources beyond most in the channel; and, most of all, they can afford to argue in court even when they’re in the wrong.
For that reason, many aggrieved solution providers simply roll over when their vendors amend partnership agreements at will, violate deal registrations and account protections, take deals for themselves or – worse – give them to another partner, or change incentive programs without notice.
Solution providers – be they VARs, managed service providers, integrators, telephony agents or consultants – are not powerless. They do have options to challenge the decisions of vendors and suppliers, especially if it results in financial damage or impedes their ability to do business. And solution providers are often successful when they challenge vendors in court.
Take for example the case of Peter Alfred-Adekeye, founder of Multiven, a solution provider specializing in Cisco warranty services. He challenged Cisco’s claims to exclusivity in being able to service operating system warranties. Alfred-Adekeye lodged an antitrust complaint in court, and essentially won when Cisco settled.
Granted, Alfred-Adekeye got more trouble than most people would want. He remains embroiled in a criminal case in which federal authorities claim he hacked Cisco’s network to steal proprietary information. He was recently indicted by U.S. authorities after a Canadian court deemed the action as a vindictive action concocted by U.S. prosecutors and Cisco.
OK, so not the best example. How about a class action lawsuit?
If the vendor action is widespread, as in the case of the telephony agents who had their annuity canceled, solution providers can band together to launch a class action lawsuit. I mentioned this during the Channel Partners Zone session, to which my fellow panelist – Peter Radizeski, president of RAD-INFO – schooled me that a class action suit isn’t possible because you need common contracts.
I did a little digging on this – after all, I didn’t spend four years in law school for nothing. My lawyer friends tell me that all you need for a class action law suit is a common point of law, not necessarily the same contractual arrangement. In this case, a carrier cancelling contractual annuities en masse would qualify the affected solution providers as a “class.”
Class action lawsuits are often difficult, expensive and do not provide immediate remedy. So what else can you do?
Stop doing business with the vendor. In fact, go one step further and take the accounts they want with you. This is a protracted strategy that often takes time to produce the desired results. But it can often work for the better. What the vendors really want are the accounts, and the accounts won’t come easily if it means canceling existing contracts and disrupting their service. So, solution providers must work to recapture those accounts over time and port them to another provider.
This is what Riordan Maynard, founding partner of Touchbase, did in 2007. His company was doing more than $150 million a year worldwide in Avaya business. Avaya was steadily and gradually taking business away from Touchbase, claiming territories were off limits to partners. Rather than going to court, Touchbase discontinued its Avaya partnership and switch to Cisco. It was a radial move that essentially brought company down to zero revenue. In just 18 months, Touchbase had recovered all its lost Avaya revenue and doubled up its business with the help of Cisco. Nothing delivers sweet revenge like success with someone else.
Legal recourse often seems like the nuclear option when dealing with an oppressive vendor. Perhaps there’s something more conventional, like civil disobedience. It occurred to me after the Channel Partners session ended that the aggrieved telephony agents had missed an opportunity to form a quasi-union to fight their carrier’s decision. What they could have done was taken their plight to the media, which always loves a David and Goliath story.
Drumming up media attention has often proven a sure-fire way of influencing vendor channel policy – especially if solution providers complain en mass. Negative headlines garner more attention in vendor offices than many solution providers think. They make vendors and their executives look bad, warn solution providers to steer clear and open opportunities for competitors.
This exact scenario is playing out today between several solution providers and a certain channel support company. The veracity of the allegations hasn’t been proven, so I’ll decline to name the company, and the channel press hasn’t engaged in the story, as yet. However, the guerilla media campaign waged by disaffected solution providers has taken a toll on this business.
The bottom line is that there are always options when dealing with hostile vendors. Perhaps the best bit of advice, though, is not putting your business in a vulnerable position. Vendors may hand you a boilerplate contract, but that doesn’t mean you can’t demand amendments and revisions. Legal services are expensive. An upfront investment in legal council when signing vendor reseller agreements may save you a lot of headaches in the future.
Above all, no one says you have to sign a contract. If the terms are not equitable – and that term is relative – walk away. Go find a vendor partner that will give you better terms or treat you more fairly. That is a solution provider’s ultimate right.
* * *
Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.
On Twitter:
Larry Walsh:@lmwalsh2112| Channelnomics: @channelnomics
Leave a Reply
![]() |







